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Will Iron ore prices continue to run unabated?

Team Veye | 19 Jul 2021

Will Iron ore prices continue to run unabated?

Iron ore market has been in a bull run for more than two years now. Booming iron ore prices are expected to account for nearly half of Australia's record export earnings from resources this financial year.

Australia has been cashing on this boom as it is the biggest supplier of sea borne iron ore. In May 2021, spot iron ore reached a new high, which was trading at less than half, just a year ago.

Our iron ore producers are benefiting from current high prices and decades of investment and innovation, The Department of Industry revised its estimate up by 14% from a March forecast due to strong iron ore prices, which hit an all-time high above $200 a tonne in early May on strong steelmaking demand.

According to Trading Economics, Prices for iron ore cargoes with a 63.5% iron content for delivery into Tianjin remained near $220 per tonne at the beginning of July, close to a record high of $232 reached on May 12th on declining stockpiles and concerns over supply.

The stockpiles of imported iron ore at Chinese ports declined for four consecutive weeks to 123.95 Mt as of Jun 25, 2021, the lowest level in eight months.

The continued rise in prices is showing no signs of abating, primarily amid huge demand from China while Australia’s biggest competitor, Brazil struggled to export due to disruptions caused by Covid. Brazilian miner, Vale recently announced that it had halted production at its Timbopeba mine and part of its Alegria mine following warnings about tailings dam risks. The Australian suppliers have broadly remained disciplined and not increased production arbitrarily.

The Office of the Chief Economist (OCE) expects prices to ease from their current highs over the second half of 2021 but not to fall below $100/t until late in 2022 and average $90/t in 2023. At these levels, all but the highest-cost producers in Australia will still remain profitable

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